Digital Transformation: Oil Refining and Logistics in the Cloud

What does digital transformation mean for oil refining and logistics? Tim Harris, chief information officer of Andeavor, tells CXOTalk how the organization has moved entirely to the cloud and become the first oil and gas company running SAP S4.

“We were a fairly conservative company with some traditional process. Now that we’re in the cloud, we do have the ability to work from anywhere. We can access our data securely from anywhere. You don’t have to jump through a bunch of hoops and a bunch of extra passwords to get there. It’s very secure but, at the same time, it’s very seamless,” Harris says. “Now, the expectation is real-time analytics, real-time data, and real-time insights across the entire business.”

Harris has been CIO since 2016 at Andeavor, where he previously led a newly formed division to deliver shared services across IT, finance and corporate functions. Before that, he was the founder of CloudSource and headed global technology services at Mylan.

Transcript

Michael Krigsman: We are live from Sapphire Now 2018 in Orlando, Florida. I'm Michael Krigsman. I'm an industry analyst and the host of CxOTalk. We're speaking with Tim Harris, who is the chief information officer of Andeavor. Hey, Tim, thanks for spending some time with us.

Tim Harris: Absolutely.

Michael Krigsman: Tell us about Andeavor.

Tim Harris: Yeah. We're a large refining market and logistics organization, primarily on the western side on the United States. We've got about 3,000 retail stores, 10 refineries, about 1.2 million barrels a day. We just acquired Western Refining last year, and we're in the process of integrating them now.

Michael Krigsman: Now, I know that you've been undergoing a very large transformation, so please tell us about that.

Tim Harris: When we looked at our company, we looked at our goal to grow so aggressively, both through acquisition and organically. We didn't feel like our business was fit for purpose. Either the systems or the processes really weren't ready to support what we wanted to do.

We've moved 100% to the cloud. We've got a new digital workplace that really changes the way that all of our employees interface with technology. Probably the most monumental change has been our change to SAP S4. We're the first oil and gas company now running SAP S4, and we've been live about two months.

Michael Krigsman: As you move to the cloud, what does that do to your processes and also to the mindset of the way people work and the way they relate to technology?

Tim Harris: We were a fairly conservative company with some traditional process. Now that we're in the cloud, we do have the ability to work from anywhere. We can access our data securely from anywhere. You don't have to jump through a bunch of hoops and a bunch of extra passwords to get there. It's very secure but, at the same time, it's very seamless. I think it's starting to drive a mentality that you don't have to be in the walls of the office, necessarily, to get your work done.

At the same time, we're completely out of the capital game. We don't have to plan and invest a whole bunch of capital to do the technology kind of things that we want to do, so the speed to market is much quicker as well.

Michael Krigsman: Was it hard to make the decision to move to the cloud?

Tim Harris: When you do the math and really understand the way that it works, get over those initial fears of security--and, in reality, we're more secure now, than we ever have been, in the cloud--there are so many benefits; there's so much upside. It really wasn't that difficult.

Michael Krigsman: You say that it changed the mentality of people as well.

Tim Harris: We don't have to plan as long. We don't have to wait eight weeks to order some piece of technology and wait for it to hit the dock and then go plug it in. I mean, look, we still have some challenges around turning everything up as quickly as we'd like, but it's so much better than it was before. It's really a no-brainer.

Michael Krigsman: It sounds like the expectation of the business is that IT is going to be faster than ever before.

Tim Harris: We used to run our company on spreadsheets and PowerPoint presentations. Now, the expectation is real-time analytics, real-time data, and real-time insights across the entire business.

Michael Krigsman: And, breaking down silos seems also to have been an important part of this.

Tim Harris: With our SAP strategy, we wanted a single application that integrated the entire business. Now that we're fully integrated, the silos don't work anymore. In the old days where it was more of a best of breed model, one application per function, people could work independently. If data was wrong in one system, it didn't impact the entire business, so you could get away with it. There were still problems that we couldn't see, but you could get away with that.

Now, end-to-end, from the initial contract entered in the system all the way through until we're collecting cash from the retail stations, if we're not working together and talking about the data and the way that we structure things from an end-to-end standpoint, we're not going to get our job done.

Michael Krigsman: Tim, they say these days that data is the new oil.

Tim Harris: Yeah.

Michael Krigsman: Since you are an oil company, what does data mean for you? How are using data differently, and how is it changing your business?

Tim Harris: We're still going to always make our money from oil, so we're not selling data. But, the point for us is it is the most critical thing that goes on. We believe that all things digital rest on top of data, so data has to be structured the right way, it's got to be cleansed the right way, and it's got to be managed the right way so that we can really get our insights.

We believe that we can lead the industry in digital transformation, and it's 100% because we've taken the time to structure the data the right way. We've got our IoT sensors dumping data into our systems now and giving us insights in ways that we've never had before. It is going to be the core of everything that we do.

Michael Krigsman: It seems like the data is the next frontier for delivering value through technology.

Tim Harris: As much as you want to jump into artificial intelligence, IoT, and everything that digital promises, it simply won't work if the data structure isn't there.

Michael Krigsman: The data is the foundation for innovation. Is that too strong a statement?

Tim Harris: No. No. For us, we use the terms "innovation" and "digital" synonymously. Again, we believe 100% that everything digital relies on data. If there's no data, there will be no digital.

Michael Krigsman: Can you give us some examples of what that means for you?

Tim Harris: Yeah, so it's everything from really advanced business insights through analytics. We're using artificial intelligence right now to predict failures in the refinery. We have thousands of sensors, and they've been there for years collecting data on average every three seconds. Now, historically, what we've done is we've looked at every data point and, if it was in spec, we would ignore it. If it was out of spec, a technician would go take some action.

Now, we believe that looking at every data point, whether it's good or bad, looking at every data point will really generate trends and allow us to see things that we never would have seen before. We'll replace a compressor every three years because the schedule says you ought to replace it every three years, and that's expensive, it's hard, and it takes a lot of time. Now, through our data insights, we think we can predict when that's going to fail. If it can run forever, great, we'll ignore it. But, as soon as we sense that there's going to be a problem, we can get a technician out in real time to get that fixed and really improve the efficiency of our operations.

Michael Krigsman: How do you gather this baseline data? To do this, you have to have a lot of stored history.

Tim Harris: You have to have a lot of data. Yeah, and we do. Again, in our industry, we've been collecting this data for a long time. We've never had the computing horsepower to do anything with it, but we have the data.

The great news about oil and gas is, everybody talks about IoT. In many industries, the long pole in getting IoT stood up is developing your sensor strategy and implementing the sensors. It takes a lot of time, and it's typically expensive.

In our industry, we've had all that, so we've been collecting the information for a long time. For the first time now, based on our technology transformation, we have the ability to look at that data in real time. Again, we have years of history, so we can now use that history to create the models and predict the failures.

Michael Krigsman: In a way, you have been preparing for this moment, going back many years, through good data hygiene and just the kind of data collection that you've needed to run your business.

Tim Harris: That's right. Yeah.

Michael Krigsman: Tim Harris, CIO of Andeavor, thank you so much.

Tim Harris: Good. Thank you.

Michael Krigsman: We are live from Sapphire Now 2018 in Orlando, Florida. I'm Michael Krigsman. I'm an industry analyst and the host of CxOTalk. We're speaking with Tim Harris, who is the chief information officer of Andeavor. Hey, Tim, thanks for spending some time with us.

Tim Harris: Absolutely.

Michael Krigsman: Tell us about Andeavor.

Tim Harris: Yeah. We're a large refining market and logistics organization, primarily on the western side on the United States. We've got about 3,000 retail stores, 10 refineries, about 1.2 million barrels a day. We just acquired Western Refining last year, and we're in the process of integrating them now.

Michael Krigsman: Now, I know that you've been undergoing a very large transformation, so please tell us about that.

Tim Harris: When we looked at our company, we looked at our goal to grow so aggressively, both through acquisition and organically. We didn't feel like our business was fit for purpose. Either the systems or the processes really weren't ready to support what we wanted to do.

We've moved 100% to the cloud. We've got a new digital workplace that really changes the way that all of our employees interface with technology. Probably the most monumental change has been our change to SAP S4. We're the first oil and gas company now running SAP S4, and we've been live about two months.

Michael Krigsman: As you move to the cloud, what does that do to your processes and also to the mindset of the way people work and the way they relate to technology?

Tim Harris: We were a fairly conservative company with some traditional process. Now that we're in the cloud, we do have the ability to work from anywhere. We can access our data securely from anywhere. You don't have to jump through a bunch of hoops and a bunch of extra passwords to get there. It's very secure but, at the same time, it's very seamless. I think it's starting to drive a mentality that you don't have to be in the walls of the office, necessarily, to get your work done.

At the same time, we're completely out of the capital game. We don't have to plan and invest a whole bunch of capital to do the technology kind of things that we want to do, so the speed to market is much quicker as well.

Michael Krigsman: Was it hard to make the decision to move to the cloud?

Tim Harris: When you do the math and really understand the way that it works, get over those initial fears of security--and, in reality, we're more secure now, than we ever have been, in the cloud--there are so many benefits; there's so much upside. It really wasn't that difficult.

Michael Krigsman: You say that it changed the mentality of people as well.

Tim Harris: We don't have to plan as long. We don't have to wait eight weeks to order some piece of technology and wait for it to hit the dock and then go plug it in. I mean, look, we still have some challenges around turning everything up as quickly as we'd like, but it's so much better than it was before. It's really a no-brainer.

Michael Krigsman: It sounds like the expectation of the business is that IT is going to be faster than ever before.

Tim Harris: We used to run our company on spreadsheets and PowerPoint presentations. Now, the expectation is real-time analytics, real-time data, and real-time insights across the entire business.

Michael Krigsman: And, breaking down silos seems also to have been an important part of this.

Tim Harris: With our SAP strategy, we wanted a single application that integrated the entire business. Now that we're fully integrated, the silos don't work anymore. In the old days where it was more of a best of breed model, one application per function, people could work independently. If data was wrong in one system, it didn't impact the entire business, so you could get away with it. There were still problems that we couldn't see, but you could get away with that.

Now, end-to-end, from the initial contract entered in the system all the way through until we're collecting cash from the retail stations, if we're not working together and talking about the data and the way that we structure things from an end-to-end standpoint, we're not going to get our job done.

Michael Krigsman: Tim, they say these days that data is the new oil.

Tim Harris: Yeah.

Michael Krigsman: Since you are an oil company, what does data mean for you? How are using data differently, and how is it changing your business?

Tim Harris: We're still going to always make our money from oil, so we're not selling data. But, the point for us is it is the most critical thing that goes on. We believe that all things digital rest on top of data, so data has to be structured the right way, it's got to be cleansed the right way, and it's got to be managed the right way so that we can really get our insights.

We believe that we can lead the industry in digital transformation, and it's 100% because we've taken the time to structure the data the right way. We've got our IoT sensors dumping data into our systems now and giving us insights in ways that we've never had before. It is going to be the core of everything that we do.

Michael Krigsman: It seems like the data is the next frontier for delivering value through technology.

Tim Harris: As much as you want to jump into artificial intelligence, IoT, and everything that digital promises, it simply won't work if the data structure isn't there.

Michael Krigsman: The data is the foundation for innovation. Is that too strong a statement?

Tim Harris: No. No. For us, we use the terms "innovation" and "digital" synonymously. Again, we believe 100% that everything digital relies on data. If there's no data, there will be no digital.

Michael Krigsman: Can you give us some examples of what that means for you?

Tim Harris: Yeah, so it's everything from really advanced business insights through analytics. We're using artificial intelligence right now to predict failures in the refinery. We have thousands of sensors, and they've been there for years collecting data on average every three seconds. Now, historically, what we've done is we've looked at every data point and, if it was in spec, we would ignore it. If it was out of spec, a technician would go take some action.

Now, we believe that looking at every data point, whether it's good or bad, looking at every data point will really generate trends and allow us to see things that we never would have seen before. We'll replace a compressor every three years because the schedule says you ought to replace it every three years, and that's expensive, it's hard, and it takes a lot of time. Now, through our data insights, we think we can predict when that's going to fail. If it can run forever, great, we'll ignore it. But, as soon as we sense that there's going to be a problem, we can get a technician out in real time to get that fixed and really improve the efficiency of our operations.

Michael Krigsman: How do you gather this baseline data? To do this, you have to have a lot of stored history.

Tim Harris: You have to have a lot of data. Yeah, and we do. Again, in our industry, we've been collecting this data for a long time. We've never had the computing horsepower to do anything with it, but we have the data.

The great news about oil and gas is, everybody talks about IoT. In many industries, the long pole in getting IoT stood up is developing your sensor strategy and implementing the sensors. It takes a lot of time, and it's typically expensive.

In our industry, we've had all that, so we've been collecting the information for a long time. For the first time now, based on our technology transformation, we have the ability to look at that data in real time. Again, we have years of history, so we can now use that history to create the models and predict the failures.

Michael Krigsman: In a way, you have been preparing for this moment, going back many years, through good data hygiene and just the kind of data collection that you've needed to run your business.

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